BASSETERRE, St. Kitts – RECENTLY sworn-in Minister of Finance and Prime Minister Hon. Dr. Denzil Douglas has set the need to significantly reduce the national debt and practise stricter fiscal management high on his agenda.
“Our aim is to bring down the debt dramatically so that we may divert an even greater proportion of our very limited resources from debt servicing to people-oriented development initiatives,” Douglas said in address to the nation at the swearing-in ceremony of his nine-member cabinet on Sunday (Feb. 7).
The portfolio was transferred to Dr. Timothy Harris in 2008, after PM Douglas had led the ministry following his re-election in 2004. At that time, Dr. Harris described the national debt as “the highest in our history” as the Federation led a field of seven Caribbean countries that are among the top ten most indebted nations in the world.
Since then, Harris committed to reduce the debt, as he opined it did not “provide us with the fiscal policy space that we would like or the agility to manoeuvre in times of turmoil”.
As detailed in the 2009 Budget, a 20% reduction in debt to GDP ratio has reduced the amount of overall debt to 177.4% of GDP. The public sector debt was roughly EC $2.6 billion as of June 30, 2009 but this figure is still almost three times as much as the accepted 60% recommended by the World Bank.
Now that the ministry has returned to the watch of Prime Minister Douglas, a similar commitment has been made as it relates to more aggressive collection and reducing government expenses and wastages.
While the implementation of Value Added Tax (VAT) still looms, Douglas hinted that the current tax system would be looked at under his guidance but made no mention of the new tax being introduced.
“We will not let down our guard. We will be even more vigilant in collecting outstanding revenue, controlling expenditure and securing fiscal surpluses on an ongoing basis.
“We will also examine and reform the entire tax system with the view to ensuring that coverage of our tax system is much more comprehensive and the tax burden is shared in a much more equitable manner while at the same time, our low-income group all afforded much greater protection,” he added.
Douglas assured the nation that his entire cabinet would play a greater role in fiscal management by submitting frequent reports on financing and debt management in their respective ministries.
Furthermore, PM Douglas made it clear that every initiative that comes to the Cabinet for approval has to be accompanied by a careful analysis of its costs, benefits and its impact on the national debt in the short and long terms.
While Douglas said that the nation can “see and feel the enormous positive impact of the many projects funded by the debt”, he noted that one sure way to reduce the standing debt is through the reduction in the size of government by privatizing a number of public enterprises.
“We will therefore accelerate our privatization and commercialization programme, while at the same time we ensure that even those entities that must, of necessity, remain in the public sector improve their operational efficiency and carry out their mandate in a more business-like manner,” he concluded.
